Health Spending Slowed in ’09, ’10

Analysts for the Centers for Medicare & Medicaid Services (CMS) report in a Health Affairs journal article that health spending in 2009 and 2010 show low rates of growth, according to the annual report of national health expenditures (NHE). The paper notes health care spending grew 3.8 percent in 2009 and 3.9 percent in 2010, the slowest in the 51-year history of the NHE.

The report is prepared annually by the CMS Office of the Actuary and summarizes recent trends in health care spending based on the most current data sources. Available since 1960, the NHE represents the official estimates of total health care spending in the United States and measures annual health spending by the types of goods and services delivered (hospital care, physician services, retail prescription drugs, etc.), by the programs and payers that pay for that care (private health insurance, Medicare, Medicaid, etc.), and by the sponsors who are ultimately responsible for financing that care (private business, households, and governments).

Key findings from the new report include:

Household health care spending equaled $725.5 billion in 2010 and represented 28 percent of total health spending, slightly lower than its 29 percent share in 2007. Growth in total private health insurance premiums slowed in 2010 to 2.4 percent from 2.6 percent in 2009, continuing a slowdown that began in 2003. Despite this deceleration, for the first time in seven years, the growth in premiums exceeded the growth in insurer spending on health care benefits, with the net cost of insurance increasing by 8.4 percent or $11.3 billion in 2010. Out-of-pocket spending by consumers increased 1.8 percent in 2010, accelerating from 0.2-percent growth in 2009.

Retail prescription drug spending (10 percent of total health care spending) grew only 1.2 percent to $259.1 billion in 2010, a substantial slowdown from 5.1-percent growth in 2009 and the slowest rate of growth for prescription drug spending recorded in the NHE.

The federal government financed 29 percent of the nation’s health care spending in 2010, an increase of six percentage points from its share in 2007 of 23 percent, and reached $742.7 billion. Part of that increase came from enhanced federal matching funds for state Medicaid programs under the American Recovery and Reinvestment Act (Recovery Act), which expired in 2011. Medicare spending grew 5.0 percent in 2010, a deceleration from growth of 7.0 percent in 2009.

The state and local government share of total health spending declined from 18 percent in 2007 to 16 percent in 2010 and totaled $421.1 billion, in part due to the temporary assistance in the Recovery Act.

Hospital spending, which accounted for roughly 30 percent of total health care spending, grew 4.9 percent to $814.0 billion in 2010, compared to growth of 6.4 percent in 2009.

Growth in private health insurance spending for hospital services, which in 2010 accounted for 35 percent of all hospital care, slowed considerably in 2010.

Physician and clinical services spending, which accounted for 20 percent of total health care spending, grew 2.5 percent to reach $515.5 billion in 2010, slowing from 3.3-percent growth in 2009.

Private businesses financed $534.5 billion, or 21 percent of total health spending in 2010, down from a 23-percent share in 2007.